Under Medicare for All Plan, Many Hospitals Would Be Forced to Close—Especially in Poor, Rural Areas

Medicare for All Plan would threaten rural hospitals. Peter Suderman writes:

It’s probably an overstatement to say that every single hospital would close. But […] under a single-payer plan paying current Medicare rates, some, and perhaps lots, almost certainly would. And many of the hospitals that stayed open would likely shed staff and services.

Medicare pays far, far less than private rates, and the higher rates from private payers is part of what keeps hospitals afloat financially. One estimate found that providers would take something like a 40 percent pay cut under the Sanders plan. And that cut would take place very quickly, as the Sanders plan calls for the elimination of most private insurance in just four years. […]

The nation’s hospitals would lose somewhere on the order of $150 billion a year, according to an article in The Journal of the American Medical Association. Which would mean that someone would have to be paid less, and it wouldn’t just be insurance companies: It would be nurses and doctors, therapists and billing specialists, the entire universe of middle-class jobs that America’s health care industry supports. Even some physicians who support single-payer have suggested they are worried about the possibility that hospitals would lose money. […]

Cuts to hospital payments, meanwhile, would be hardest to bear for rural hospitals that serve poorer populations. Many of these hospitals are, for obvious reasons, already struggling financially, and under a system of all Medicare rates, they would likely be first to close, leaving local residents with fewer health care options. [Sen. Elizabeth] Warren styles herself a populist champion of the working class, but it is not much of a stretch to say she supports a plan that would make health care worse and less accessible for the nation’s rural poor. 

One response to this problem might be to have Medicare for All pay providers more than today’s Medicare does. That is roughly what the state of Maryland has done with its all-payer rate setting program, a system of price controls that equalizes the differential between Medicare rates and private rates. As a result, the state’s Medicare rates are far higher than is typical, and the state’s hospitals end up with about $2 billion extra in Medicare funds each year. But doing so would eliminate the “savings” in terms of total national health spending that single-payer supporters like to tout.

[Peter Suderman, “Under Warren’s Medicare for All Plan, Many Hospitals Would Be Forced to Close—Especially in Poor Rural Areas,” Reason, June 27]